Chancellor Jeremy Hunt has confirmed that the pensions triple lock is to be protected.
In the Autumn Statement, the government said the state pension and pension credit will rise in line with inflation in April 2023, an increase of 10.1 per cent.
“This government is on your side”, Hunt told pensioners during his address to MPs in the House of Commons.
The triple lock promises an increase in the state pension by whichever is highest - earnings growth, consumer price inflation growth, or 2.5 per cent a year.
There has been uncertainty over the future of the triple lock in recent weeks following September’s “mini” Budget and the spiralling inflation experienced by the UK in the past year.
Just a month ago, Hunt said he was “not making any commitments” on the pension triple lock after his predecessor Kwasi Kwarteng reiterated the government’s commitment to the safeguard only weeks before.
The latest inflation figures published yesterday by the Office for National Statistics showed that inflation hit a 41-year high of 11.1 per cent in October.
The ONS said gas and electricity prices made the largest upward contribution to the change, despite the energy price guarantee capping the amount consumers can be charged per kilowatt hour of energy used.
Quilter’s head of retirement policy, Jon Greer said: “Committing to the triple lock will be extremely costly to the Treasury, but given soaring inflation, the alternative would have been too politically damaging.”
In Greer’s view, reinstating it was “ultimately the right move” and will go a long way towards support pensioners in what is a challenging time.
The triple lock was scrapped last year following an anomalous rise in earnings, meaning pensioners received just a 3.1 per cent increase in the state pension in April 2022.
“The triple lock commitment will see the full new state pension – for those reaching state pension age from 6 April 2016 – rise to £203.85 per week, or £10,600.20 per year as a result of the 10.1 per cent inflation figure seen in September,” Greer explained.
'Sting in the tail'
However, while the confirmation that the triple lock will remain has been welcomed by the industry, some pointed out that issues remain.
Canada Life’s technical director, Andrew Tully said although today’s announcement is positive, “there is a sting in the tail" as there is potential for the state pension to exceed the frozen personal income tax threshold.
This would potentially pull “many millions more pensioners into paying income tax”, Tully said.
My Pension Expert chief executive, Andrew Megson described the announcement as an "olive branch to worried pensioners" but noted that most pensioners' currently have "very little breathing space".
Two-thirds of Britons aged 55 and over are avoiding turning on their heating, while almost a fifth (18 per cent) are planning to reduce the number of meals they eat, according to My Pension Expert’s research.